State R&D Tax Benefits

Many states offer the R&D tax credit which generally follows the federal regulations and IRS guidance on what constitutes Qualified Research expenditures (QREs). However, there are some states that are an exception to the federal guidelines, such as Connecticut and California. For example, Connecticut has a lower threshold defining expenditures under Section 174 which allows a greater amount of expenditures to qualify as for the R&D tax credit. California utilizes a different definition of gross receipts and only includes sales of real, tangible, or intangible property held for sale to customers in the ordinary course of the taxpayer’s trade or business delivered or shipped to a purchaser within California and does not include service-related receipts, rents or interest.

Summary of states offering R&D tax credit:

States without R&D tax credit:

· Alabama
· District of Columbia
· Mississippi
· Missouri
· Montana
· Nevada
· Oklahoma
· South Dakota
· Tennessee
· Washington
· West Virginia
· Wyoming